Solving Whose Problem? – by Thomas Sowell

barney_frank66

No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems— of which getting elected and re-elected are number one and number two. Whatever is number three is far behind.

Many of the things the government does that may seem stupid are not stupid at all, from the standpoint of the elected officials or bureaucrats who do these things.

The current economic downturn that has cost millions of people their jobs began with successive administrations of both parties pushing banks and other lenders to make mortgage loans to people whose incomes, credit history and inability or unwillingness to make a substantial down payment on a house made them bad risks.

Was that stupid? Not at all. The money that was being put at risk was not the politicians’ money, and in most cases was not even the government’s money. Moreover, the jobs that are being lost by the millions are not the politicians’ jobs— and jobs in the government’s bureaucracies are increasing.

No one pushed these reckless mortgage lending policies more than Congressman Barney Frank, who brushed aside warnings about risk, and said in 2003 that he wanted to “roll the dice” even more in the housing markets. But it would very rash to bet against Congressman Frank’s getting re-elected in 2010.

After the cascade of economic disasters that began in the housing markets in 2006 and spread into the financial markets in Wall Street and even overseas, people in the private sector pulled back. Banks stopped making so many risky loans. Home buyers began buying homes they could afford, instead of going out on a limb with “creative”— and risky— financing schemes to buy homes that were beyond their means.

But politicians went directly in the opposite direction. In the name of “rescuing” the housing market, Congress passed laws enabling the Federal Housing Administration to insure more and bigger risky loans— loans where there is less than a 4 percent down payment.

A recent news story told of three young men who chipped in a total of $33,000 to buy a home in San Francisco that cost nearly a million dollars.

Why would a bank lend that kind of money to them on such a small down payment? Because the loan was insured by the Federal Housing Administration.

The bank wasn’t taking any risk. If the three guys defaulted, the bank could always collect the money from the Federal Housing Administration. The only risk was to the taxpayers.

Does the Federal Housing Administration have unlimited money to bail out bad loans? Actually there have been so many defaults that the FHA’s own reserves have dropped below where they are supposed to be. But not to worry. There will always be taxpayers, not to mention future generations to pay off the national debt.

Very few people are likely to connect the dots back to those members of Congress who voted for bigger mortgage guarantees and bailouts by the FHA. So the Congressmen’s and the bureaucrats’ jobs are safe, even if millions of other people’s jobs are not.

Congressman Barney Frank is not about to cut back on risky mortgage loan guarantees by the FHA. He recently announced that he plans to introduce legislation to raise the limit on FHA loan guarantees even more.

Congressman Frank will make himself popular with people who get those loans and with banks that make these high-risk loans where they can pocket the profits and pass the risk on to the FHA.

So long as the taxpayers don’t understand that all this political generosity and compassion are at their expense, Barney Frank is an odds-on favorite to get re-elected. The man is not stupid.

What is stupid is believing that politicians are trying to solve our problems, instead of theirs.

As for the FHA running low on money, that is not about to stop the gravy train, certainly not with an election coming up in 2010.

The Federal Deposit Insurance Corporation is also running low on money. But that is not going to stop them from insuring bank accounts up to a quarter of a million dollars. It would be stupid for them to stop with an election coming up in 2010.

  • mattheweden26

    Do not waste your time just get a degree in Health care admin and find work. Check the website http://bit.ly/6jqMDp

  • http://www.facebook.com/people/Edward-Durfee/1330511053 Edward Durfee

    It is clean, to the point writing like this that we need to see published everywhere. Will the people come to understand their power of the vote? Not likely, but let's do ALL THAT WE CAN to awaken the Patriots of America that are willing and able to stand the line and stop the bleeding. This nonsense of OUR TAX dollar$ funding the insanity of bailouts, etc HAS TO END. Let the banks go down. They are the problem anyway. The Federal(sic) Reserve has destroyed our economy and our dollar and has taken our tax dollars to fund the destruction. TIME TO END THE FED and return to SOUND MONEY, gold and $ilver coins

  • prudentman

    Barney Frank is a poster child for supporters of a Congressional Term Limit Referendum. Now is time to for all us to encourage such action.

  • prudentman

    Who is going to do the manual work to produce the wealth needed to pay the health workers? Lawyers, politicians, investment bankers, social workers, academics, accountants, journalists, etc.?

    Laws are made in Congress!!

  • USMCSniper

    Ahhh Barbey Frank, the Duke of Deviancy and Debauchery fom MA following his fellow homosexual John Maynard Keynes dictates to destroy the US economy.
    He advocates the stimulus or economic crank, like any other economic panacea, is a fake cure that gives its victims a temporary but false sense of well-being, even as it sets about causing long term damage to users and the economic community at large. The opium of the economists know as “stimulus” acts directly on bread winners and investors by misdirecting them into production plans and consumption levels which cannot be successfully coordinated or sustained across time. As a consequence, the “high” of this political drug lasts for only a few months, often followed by a depressing “crash” period, which cannot be avoided without further and ever increasing quantities of “stimulus”. The drug received its proper name “crank” because it was most often smuggled into policy debates by monetary cranks, the most famous of whom was John Maynard Keynes.

  • Tim

    As always Mr. Sowell is on the mark.

    It is interesting that the idiot Frank is gay/moron and has absolutely no idea which end is up….much less what it is actually used for…..of course this is why he is a moron….who happens to be gay….meaning you do not have to be gay to be a moron though perhaps it helps…..

  • WFB2

    I have absolutely no use for Frank – his politics and lifestyle. But he's not a moron. He's quite intelligent. Arrogant and a bore but not dumb. It's the people who keep electing that are morons.

  • frank miller

    “The current economic downturn that has cost millions of people their jobs began with successive administrations of both parties pushing banks and other lenders to make mortgage loans to people whose incomes, credit history and inability or unwillingness to make a substantial down payment on a house made them bad risks.”

    that's not the main vector. Derivatives are what cause this to be a disaster. Without derivatives this would have been a very minor downturn.

  • frank miller

    you really don't know what you are talking about. Take some courses in economics. or pick up a book. Don't be an idiot who repeats the words of other idiots…try thinking for yourself…by all means read Sowell and Milton Friedman…but try to expand your horizons. Galbraith,Keynes, Roubini, Taleb….all these thinkers could help strip you of your certainties…

  • bubba4

    Is this article for people with no memory. I think Sowell just pulled from his file “Lies I told about Barney Frank a year ago”. Bizaro world history 101.

  • Tim

    Revelance to intelligence is true perhaps, though to common sense he is a moron at least in my humble (hopefully) opinion…and I do also wonder why people vote for some of these idiots…when we can answer that maybe we can figure out solutions…

  • Euclid22

    Frank did you ever graduate from elementary school? Economic courses that promote self instead of protecting those who elected you is tyranny….plain and simple.

    You and Barney (Free Parking in Rear) Frank are both copraphagic. Your motivations to destroy the best experiment in human freedom and dignity makes all those who support a half black/traitor and his aparchiks to destroy millions of men ,women and children both here and in the world.

    You and your ilk are disgusting..

  • Celia1

    We know all of this……………..we watched him on C-Span in 2003……we listened to him say oversight was not needed on home loans……….but what can we do? we are not his home state………we don't keep him in Congress……….HE ……IS….ONE …BIG …LIAR…….A BIG …”Cheat”

    But his state keeps sending him in to “SESRVE” them……..lol

  • Celia1

    Bubba …..this is not lies………GOOGLE it yourself….he was on C-Span and he is gone big fat liar…………….Barney, that is………………..

  • Celia1

    Prudentman do you really think that any Congressman wants limited terms?

    NO…………NO……….NO…………….and most are not working for us………I say get rit of all of them and start over……………………no laywers who can rob us……

  • Celia1

    He is a disgrace to his state………….

  • keithrage

    As someone else has said “Can you hear that sucking sound? Oh thats just Barney Frank”.

  • prudentman

    That's why you need a National Referendum!

  • andrewnitzberg

    pLEASE NOTE; Economic theory has changed since the brilliant work of Keynes and Galbraith.

    Neo-Keynesian theory makes little difference between government spending and private spending. That is why the Keynesian substitutes government spending when private spending slows.

    But current economists have moved beyond Keynes, Galbraith, and the others you mentioned.

    Government spending is now seen as primaritly inflationary as opposed to growth stimulating. ALL CURRENT ECONOMISTS AGREE: Keynes was wrong; YOU CANNOT SPEND YOUR WAY OUT OF PROBLEMS WITH GOVERNMENT MONEY.

  • andrewnitzberg

    Derivatives? You are kidding. The derivatives made a bad situation worse and created a short-term liquidity problem.

    This is not a serious statement. Just an attenuated version of 'blame capitalism'.

  • Gamal

    Barney blames Bush's war in Iraq on our economic woes as he makes them worse.

  • Carterthewriter

    About as accurate article about what has gone on too long in Congress. While the leftists perpetuate this mess, the right sat idly by collecting their share of the perks.

    Every four years we're promised change, and the following year realized we are duped once again.

    We're running out of money, clowns.

  • Carterthewriter

    About as accurate article about what has gone on too long in Congress. While the leftists perpetuate this mess, the right sat idly by collecting their share of the perks.

    Every four years we're promised change, and the following year realized we are duped once again.

    We're running out of money, clowns.

  • bubba4

    The whole narrative that Frannie and Freddy caused the economic crisis is nonsense. FPM is just reenforcing it's previous concept….

    Yes, Barney Frank is on C-Span sometimes. Don't tell me you have video of him admitting he caused the crisis! After all, I had to watch Obama admit he was a Muslim, there is only so much shock I can take.

    You're just not aware of how FPM and these guys play you….

  • bubba4

    Don't be so quick to jump to defend the “capitalist” on Wall Street. Much of the problem was caused by methods and devices that are abominations to capitalism, made possible only by modern computers, and we should all be weary of this.

    Although I doubt you are willing to turn away from the running FPM narrative on this, so have a happy day…it's all Barney Franks fault…YAY!!!

  • bubba4

    and homosexual…don't forget homosexual…

  • http://www.facebook.com/people/John-C-Davidson/100000093579423 John C. Davidson

    bubba4, about every comment you make includes mocking this site. Get the hell off, if you don't like it.

    Barney's back door is open, I hear.

  • WAdelstein

    We already ran out of money. Our youth are filled with pride, and self esteem, but cannot read or think critically. Its time for patriotic Americans to move, and that means leave. Find other countries to live in. For those with capital, explore possibilities abroad. join american Associations of the target countries for networking. And for those without, for investment clubs of soon to be expats and some locals and get out while you can.

  • coyote3

    Yeah, and he doesn't even do a good job of it. he has been humiliated by almost everyone here, at one time or the other, he is desensitized to it.

  • coyote3

    Barney Frank is one of those guys who goes around with solutions looking for problems. Now, because of his (and others) “solutions” there is a problem.

  • http://www.facebook.com/people/John-C-Davidson/100000093579423 John C. Davidson

    A jar of petroleum jelly, perhaps.

  • http://www.facebook.com/people/John-C-Davidson/100000093579423 John C. Davidson

    He thinks he's the poster boy of the new America. God help us.

  • CowboyUp

    Galbraith and Keynes are a waste of time, unless you just want to feel smarter than a professor. I've got a few books by both in high school, and was amazed anybody would listen to, much less pay either for instruction or consultation.

    You're right though, it pays to read wide, that way you're not fooled by bad old ideas dressed up in new words. Gems can be found in the most unlikely places as well.

  • CowboyUp

    Frank is as crooked as the workday is long, but he is one of the smartest in the dp. He plays dumb when it suits him (and the msm is yet to call him on it), but he's pretty slick, and has a keen mind for political calculation and every trick in the book. Watch how he uses Senate rules and procedure sometime.

    His “let's roll the dice,” should have gotten him kicked off every committee he sits on, but there he is.

  • CowboyUp

    Nope, patriotic Americans stay and won't be run off. If America falls, wealth won't be safe anywhere for long anyway. If you can be run out of here, you can be run out of anywhere.

  • Robert Bernier

    Wow! Read this one. It is really good. And this gentleman says it just like it is.

    This venerable and much honored WW II vet is well known in Hawaii
    for his seventy-plus years of service to patriotic organizations and causes all over the country. A humble man without a political bone in his body, he has never spoken out before about a government official, until now. He dictated this letter to a friend, signed it and mailed it to the president.

    Consult : http://xrl.us/bgeewc